U.S.-China Relations

February 4, 2015
IF10119

February 4, 2015
U.S.-China Relations
Australia, Japan, the Philippines, South Korea, and
Thailand, and by expanding military cooperation with
such countries as Singapore and Vietnam;
Overview
The U.S.-China relationship is currently one of the world’s
most consequential bilateral relationships. After 35 years of
fast-paced growth, China’s economy is now the world’s
second largest in nominal terms, after the United States, and
is estimated to have overtaken the U.S. economy as the
largest economy in purchasing power parity (PPP) terms.
The two economies are heavily interdependent and the two
nations are major economic players in almost every region
of the world. Both nations are also among the five vetowielding permanent members of the United Nations
Security Council and have militaries that are operating in
increasingly close proximity in Asia and beyond. China and
the United States are, respectively, the world’s first and
second largest emitters of greenhouse gases.
On a trip to Beijing in November 2014, President Obama
stated that, “the United States welcomes the continuing rise
of a China that is peaceful, prosperous, and stable and that
plays a responsible role in the world.” At the same time, the
President has acknowledged elements of competition in the
U.S.-China relationship and accused Chinese leaders of
being “free riders” in the international system. Areas in
which the two countries have presented competing visions
include democracy promotion, Asian security, management
of maritime territorial disputes, trade and investment,
cyberspace, space, and foreign assistance.
Leaders and Envoys
The Communist Party of China founded the People’s
Republic of China (PRC) in 1949 and has led the country
since. China’s top leader, Xi Jinping (his family name, Xi,
is pronounced “Shee”), has been Communist Party General
Secretary and Central Military Commission Chairman since
2012, and State President since 2013. The Chinese
Ambassador to the United States is Cui Tiankai (his family
name, Cui, is pronounced “Tsway”). The U.S. Ambassador
to China is former U.S. Senator Max Baucus.
The Rebalance to the Asia-Pacific Region
The Obama Administration’s overall approach to the AsiaPacific region involves a strategic rebalancing or “pivot” of
U.S. priorities to the region. Chinese commentators have
characterized the rebalance as intended to “contain” China.
U.S. officials have denied that intention. After leaving
office, an architect of the policy wrote that it was intended
to “give comfort to countries uncertain about the impact of
China’s rise and provide important balance and leadership.”
The strategy, formally announced in 2011, includes:
• “forging a broad-based military presence” in the region,
including by strengthening bilateral alliances with
• deepening relationships with emerging powers,
including China, India, and Indonesia, and pursuing new
engagement with others, such as Burma;
• stepping up engagement with regional multilateral
institutions, such as the Association of Southeast Asian
Nations (ASEAN) and the East Asia Summit; and
• expanding trade and investment and helping shape the
region’s economic rules and norms, including through a
proposed Trans-Pacific Partnership (TPP) trade
agreement with 11 other nations.
Chinese officials have been particularly critical of U.S.
efforts to strengthen U.S. military relationships in the
region, arguing that such efforts have been destabilizing.
New Model of Major Country Relations
President Xi’s signature policy toward the United States is
what China calls a “new model of major country relations,”
designed to head off the rivalry and conflict that have often
bedeviled relations between established and rising powers
over history. President Obama has agreed to work with Xi
to build a “new model” relationship, but the two presidents
have failed to agree on what it should entail. President
Obama’s version is a relationship “defined by increased
practical cooperation and constructive management of
differences.” President Xi has emphasized “respecting each
other’s sovereignty and territorial integrity, as well as
choice of development path,” references to China’s claim to
sovereignty over Taiwan, its rule in Hong Kong, Tibet, and
the northwestern region of Xinjiang, and its insistence on
continued Communist Party rule.
Taiwan in the U.S.-China Relationship
Agreements on Taiwan laid the foundation for the
normalization of relations between the United States and
China in 1979. In the 1972 Shanghai Communiqué, the
United States declared that it “acknowledges that all
Chinese on either side of the Taiwan Strait maintain there is
but one China and that Taiwan is a part of China.” In a
1979 communiqué on the establishment of U.S.-China
diplomatic relations, the United States agreed that it would
henceforth have only “unofficial” relations with Taiwan. In
a subsequent 1982 communiqué, the United States said it
intended “gradually to reduce its sale of arms to Taiwan.”
Concerned that the first two communiqués did not do
enough to protect Taiwan’s interests, the U.S. Congress in
March 1979 passed the Taiwan Relations Act or TRA (P.L.
96-8). The TRA declared that it is U.S. policy that the
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U.S.-China Relations
decision to establish diplomatic relations with the PRC
“rests upon the expectation that the future of Taiwan will be
determined by peaceful means.” The TRA also mandated
that the United States would sell Taiwan defense items “in
such quantity as may be necessary to enable Taiwan to
maintain a sufficient self-defense capability.” Beijing
continues to vow to unify the PRC and Taiwan, by force if
necessary. Washington continues to sell arms to Taiwan,
over strenuous PRC objections. Both Washington and
Beijing continue to plan for the possibility that they could
one day find themselves involved in a military
confrontation over Taiwan’s fate. In China’s case, such
planning includes investment in what the U.S. Department
of Defense (DOD) calls “anti-access/area-denial” (A2/AD)
military capabilities designed to deter U.S. and other forces
from intervening in a conflict in the Western Pacific.
The Political/Security Relationship
The United States and China have sought to expand
cooperation in addressing global and regional challenges,
such as the weak global economy, the Iranian and North
Korean nuclear programs, climate change, Afghan
reconstruction, and the Ebola epidemic. At the same time,
the United States has raised concerns about China’s use of
coercive tactics in its maritime territorial disputes with
neighbors in the East China Sea and South China Sea; the
alleged involvement of Chinese state actors in cyber
espionage and cyber-theft against U.S. targets; China’s
human rights record, including in the ethnic minority areas
of Tibet and Xinjiang; and China’s resistance to calls for
more democratic electoral reforms in Hong Kong.
The military-to-military relationship has long lagged behind
the broader relationship; both presidents have committed to
work to change that. The two militaries have stepped up the
pace of high-level exchanges. In November 2014, they
agreed to a memorandum of understanding (MOU) on rules
of behavior for safe military encounters at sea and in the air.
In 2015, the United States hopes to complete an annex to
the MOU on rules for air encounters. A longstanding source
of friction is the issue of U.S. military ships and aircraft
operating in international waters and airspace near China’s
coast. China says it has a right to regulate such activities,
and it has engaged in sometimes risky interceptions of U.S.
vessels and aircraft to prove the point. The United States
argues that international law gives China no such right.
The Economic Relationship
U.S.-China commercial ties have expanded rapidly over the
past three decades. In nominal terms, total bilateral trade
(imports and exports) rose from $2 billion in 1979 to $593
billion in 2014. In 2014, China was the United States’
second-largest trading partner, its third-largest export
market, its biggest source of imports, and one of the two
largest foreign holders of U.S. debt in the form of U.S.
treasury securities. China is estimated to be a $350 billion
market for U.S. firms, based on U.S. direct and indirect
exports to China and sales by U.S.-invested firms in China.
However, the bilateral economic relationship has become
increasingly complex and often fraught with tension. From
the U.S. perspective, many trade tensions stem from
China’s incomplete transition to a free market economy.
While China has significantly liberalized its economic and
trade regimes since 1978, it continues to impose a number
of state-directed policies that appear to distort trade and
investment flows. Major areas of U.S. concern include
China’s relatively poor record of intellectual property rights
(IPR) enforcement and its alleged cyber theft of U.S. trade
secrets; its mixed record on implementing its World Trade
Organization (WTO) obligations; its extensive use of
industrial policies, such as subsidies, to promote stateowned firms; trade and investment barriers; pressure put on
foreign-invested firms in China to transfer technology in
exchange for market access; and China’s efforts to hold
down the value of the Chinese currency against the dollar.
Many U.S. policy makers argue that such policies harm
U.S. economic interests and have contributed to U.S. job
losses. The United States and China are negotiating a “high
standard” bilateral investment treaty (BIT) with the goal of
expanding bilateral investment and trade opportunities.
Dialogues
The United States and China are engaged in more than 100
bilateral dialogues, although dialogue on strategic issues,
such as nuclear weapons policy, remains limited. Highprofile annual dialogues include:
• The Strategic and Economic Dialogue (S&ED), co-
chaired on the U.S. side by the Secretary of State and
the Secretary of the Treasury. Since 2011, the S&ED
framework has included a Strategic Security Dialogue
(SSD) that includes representatives of the two militaries.
• The Joint Commission on Commerce and Trade
(JCCT), co-chaired on the U.S. side by the Secretary of
Commerce and the U.S. Trade Representative.
Issues for the 114th Congress
The 114th Congress is expected to monitor and address the
security situation in the Asia-Pacific region, including
China’s continuing military modernization, implementation
of the U.S. strategic rebalance, and maritime disputes
between China and its neighbors. In the 113th Congress,
P.L. 113-291 required DOD to prepare a report, due in
December 2015, on its strategy to prioritize U.S. defense
interests in the region. The 114th Congress is also expected
to consider the legislative framework for cybersecurity and
bills to facilitate the approval of exports of liquid natural
gas (LNG) to non-free trade agreement countries,
potentially including China. Other issues the 114th Congress
may consider include the U.S.-China BIT and regional TPP
trade negotiations; China’s human rights record; China’s
efforts to tighten control of the Internet; PRC-Taiwan
tensions ahead of Taiwan’s 2016 presidential election; and
developments in Hong Kong.
Susan V. Lawrence, slawrence@crs.loc.gov, 7-2577
Wayne M. Morrison, wmorrison@crs.loc.gov, 7-7767
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